Standing Committee H

[Part I]

[Mr. Roger Gale in the Chair]

Higher Education Bill

Clause 39 - Effect of bankruptcy

Phil Willis: I beg to move amendment No. 183, in
clause 39, page 18, line 18, at end insert
'provided that no such regulations may establish any person or body to whom a loan is outstanding as a preferential creditor'.

Roger Gale: With this it will be convenient to discuss clause stand part.

Phil Willis: I welcome you back to the Committee, Mr. Gale. I thank the Minister and the usual channels for allowing us to begin the afternoon sitting by briefly discussing bankruptcy. Although I hope that the debate will be short, it is an important issue to consider. From the outset, I say that this is a probing amendment and we will not ask the Committee to divide on it. I hope that we will receive a satisfactory response from the Minister.
 The reason behind the amendment and for raising the issue of bankruptcy is that the whole Committee would agree that, whatever way we dress it up, future students will leave university with significantly more debt. We can call it an investment, but the reality is that, as far as the usual terms of financial prudence and credit worthiness are concerned, students will have significantly more debt. 
 We must recognise that, since 1992, the number of students filing for bankruptcy has significantly increased. In 1992, eight students filed for bankruptcy. By 1997, that figure had reached 77. By 2002, it had reached 276, and the latest available figures for 2002-03 show that the number has jumped to 899. There has been a huge growth in the number of students filing for bankruptcy over the last few years, and in particular in the last financial year. 
 The maximum that a student can borrow from the Student Loans Company is roughly £12,000, but under the proposals, that will rise to £19,650. That is a significant jump, and I am not including other debts that a student might have, which might increase with their debt portfolio. However, there is no evidence, despite the rapid increase in bankruptcy over recent years, that there are widespread plans for students to file for bankruptcy. There are roughly 1.8 million students in the system, of which 1.1 million are full time, and most of them take out some sort of loan. The fact that only a relatively small number of students file 
 for bankruptcy is an indication that this is not a massive problem for the state to consider. Nevertheless, it is a problem all the same. 
 I flatly reject the views of the former Minister for Lifelong Learning and Higher Education, the right hon. Member for Barking (Margaret Hodge), when she said: 
 ''Graduates should not see bankruptcy as an easy route to repaying the money they have borrowed through the generously subsidised student loans system.''—[Official Report, 15 May 2003; Vol. 405, c. 13WS.] 
I agree with what she said, but she is fundamentally wrong to suggest that students see bankruptcy as an easy way out of their debt problems. The reality is that students have significant debts. I say that because the penalties for filing for bankruptcy are significant, and the Committee should not run away with the idea that it is an easy decision for anyone to file for bankruptcy, particularly someone starting out on their career. It affects not only a graduate's credit worthiness, but their employment opportunities. It would preclude them from becoming a solicitor, chartered accountant, accredited accountant, architect, stockbroker, surveyor, and valuer for an auctioneer and from entering many other professions.

Jonathan R Shaw: And an MP.

Phil Willis: A discharged bankrupt can become an MP, but, as always, the hon. Gentleman makes a serious point, and we may return to it.
 There is a pragmatic issue to address, but there is also a fundamental principle. In 2002, following the Teaching and Higher Education Act 1998, the Insolvency Service considered whether students should be allowed to file for bankruptcy. It decided that students should have all their debts written off if they filed for bankruptcy. Sections 251 and 252 of the Enterprise Act 2002 abolished Crown preference for the Inland Revenue and Customs and Excise by not allowing them to be preferential creditors for either company or individual bankruptcies. It is important that the Minister addresses that specific point. 
 The 2002 Act was not taken lightly by the Government, and the philosophy behind it was that bankruptcy should not be seen as a damning indictment of an individual's ability or business prospects but, as the Americans see it, as part of a journey. The 2002 Act made it clear that the traditional Crown preference for the Inland Revenue and Customs and Excise should be set aside. The Government did that not only for British law, but to come into line with much of European and worldwide law. Australia is often cited as an example of where the new student loan and top-up fee system has been successfully introduced. A significant number of its students have very high debts, and many file for bankruptcy, but the Australian state has been deliberately excluded from being a preferential creditor. 
 What is the justification for suddenly taking students out of the bankruptcy arena? They are being told that if they file for bankruptcy in future, they will have to retain any debt to the Student Loans Company 
 and carry it forward to when they are discharged from bankruptcy. They will not have to take forward other debts, even those owed to people who were forced into bankruptcy as a result, something which often happens with small companies that have several unsecured loans. Will the Minister respond to that important issue? 
 The Government seem to be viewing students through the eyes of the right hon. Member for Barking, who is now the Minister for Children. She believes that students will leave university owing money to the Student Loans Company, file for bankruptcy in a cavalier fashion, go off round the world for a couple of years and eventually come back when all will be well. I do not believe that that is true, but it also belies the fact that the sort of debts that students will have in future will stay with them for a significant number of years. 
 All members of the Committee would accept that young graduates are unlikely to stay in the same job or career over the 25 years that their debt would stay with them. They are likely to move about. They are also far more likely to be self-employed than any other group of graduates in the history of our university system. It might be 10 years after they leave university, when they have started a business or been part of a business that they get into financial difficulties and want to file for bankruptcy. Are we saying that when people in their mid-30s get into that position and file for bankruptcy, they should be left with a significant debt to the Student Loans Company as a preferential creditor? That is fundamentally wrong. 
 My final point concerns the student debt portfolio itself. In 1997, when the Labour Government came into office, they inherited from their predecessors a provision to sell the student debt portfolio into the private sector. Hon. Members will know that one of the first pieces of legislation that the Government had to put forward was a Bill to sell the debt. It was unsuccessful, but it was part and parcel of Government policy to do that. It may be Government policy in future to sell all or part of the student debt portfolio into the private sector. In those circumstances, would a private bank that had bought the debt from the Government be a preferential creditor under the Bill? If so, it would put it in a very different situation to any other debt of any other individual or any other company in the United Kingdom. They are serious issues and I hope that the Minister can respond.

Chris Grayling: The hon. Gentleman has raised some important issues that should be aired in Committee. The Government's view should be set clearly on the record. I have a series of points that I would like to raise, and I hope that the Minister will address them. I share the hon. Gentleman's view that bankruptcy is a very serious step to take. Despite the reports of web-based communications going around the student cohorts saying that the best way to get out of fees is to file for bankruptcy, I do not seriously believe that, with the
 possible exception of a small number of graduates on the fringe, large numbers of graduates will declare themselves bankrupt just to get out of their student fees. The consequence of doing so for their professional lives would be immense.
 The fact that the issue even arises reinforces the fact that many students feel intimidated by the debt burden that they are building up through both the existing system and to a much greater extent through the system that the Government propose. I hope that the Minister will not seek to portray this measure, whether right or wrong, as being simply a response to a tide among students of using bankruptcy as a way to get out of repaying their debts. I do not believe that most serious graduates would consider such as route. 
 There are two key considerations. One is the financial process that students or graduates will go through in the case of bankruptcy. The second concerns the Government's involvement as an active or passive creditor. Will the Minister give us his views on that? 
 On the process, if a student or graduate had, for whatever reason, reached the point of having to be declared voluntarily or involuntarily bankrupt, the individual would be subject to the regime of the insolvency courts and his finances would be tied up in the courts. The Insolvency Service, the relevant officer of the Crown or an officer of the court would set parameters for managing that individual's finances. Bank accounts would be frozen and so on, and he would be given a small amount of money to live on. That is the normal process for such cases. 
 However, at the same time, the clock would be ticking. Labour Members sometimes do not fully understand that the student loan structure is not about paying when possible, but about a deferred interest process. The interest rate this year is 3.1 per cent. Interest continues to accrue each month of each year that goes by, whether the individual is a student, a graduate earning less than the threshold, a graduate who has given up to take a career break, or a graduate who has gone bankrupt.

Alan Johnson: The hon. Gentleman made that point before. The only rate of interest applied is for the cost of living. It is equivalent to the retail prices index so that the loan holds its original value. Does he accept that, or is he under the misconception that another rate of interest applies? If he does accept that, does he further accept that it is perfectly reasonable for us to ensure that the value of the original loan is maintained, without adding any extra burden, which a real rate of interest would do?

Chris Grayling: The Minister misses the point. I fully accept that the Government currently charge a rate of interest that is equivalent to the RPI, but it is still a rate of interest. Each student or graduate with a student loan will make an interest payment of 3.1 per cent. on that debt this year. That is lower than commercial rates, but two-year fixed-rate mortgages are available at 4 per cent. That is not a massive difference. Whether
 it is 2 per cent., 2.5 per cent. or 3.1 per cent.—the rates of inflation in recent years—it is still a fact that each year that a repayment is not made to the Exchequer, interest accrues on the loan and is added to the total.
 If someone is bankrupt, he may not be able to make his repayments. Not only will he not have the resources to do that, but the law will preclude him from doing so. In that case, money accrues on the overall debt level while someone is bankrupt.

Patrick Hall: I am trying to follow the hon. Gentleman's logic. Is he suggesting that if there is a period of years within which the debt is not repaid, the inflation interest is compounded and the sum due is greater when the person is in employment and starts making repayments?

Chris Grayling: Let us look at that in practical terms. Suppose someone goes bankrupt with, for example, a debt of £10,000, which is about half the maximum debt expected under the Government's proposals. Let us assume that the Government are charging interest on that loan at the rate that applies this year. If that person is bankrupt for three years and unable to make the repayments, £310 in interest will be added to the loan in the first year and it will become £10,310. In the second year, another 3.1 per cent. will be charged and just over £310 will be added, so the loan will become £10,600 and a bit. The same will happen in the third year, after which the person will end up with a debt of about £11,000. Therefore, the debt does not simply stay at £10,000 until the person can afford to repay it; it increases year by year as the interest is deferred and rolled up. The graduate will be constrained by the courts from making any payments, but the debt will rise accordingly.
 Is it the Government's intention that the debt on the loan simply carries on accruing until a person emerges from bankruptcy, goes back into the employment market, gets back on their feet and starts making repayments? From their point of view, the bankruptcy will, de facto, never have happened. If that is the Government's intention, what role will they take during bankruptcy proceedings? That relates very much to the point made by the hon. Member for Harrogate and Knaresborough (Mr. Willis). 
 If, in law, the debt simply continues, the Government will have no place as a creditor. When an individual's assets are put into the pot to be divided among the creditors, the Government's involvement would be irrelevant, and one assumes that they would not seek to participate. If they did, they would have their cake and eat it because they would have the comfort of knowing that they alone among the creditors were pretty much guaranteed of getting their money back over the 25-year period to be prescribed in the student loan regulations that they introduce. On that basis, they would face no risk. On that basis, one assumes that they would not seek to be an active participant in the bankruptcy process. If they were, they would have to recover money at the expense of other creditors, despite having a guarantee that they 
 would get their money back anyway. It is important that the Government address those issues and explain how they see their role.

George Mudie: The hon. Gentleman refers to the Government benefiting ahead of other creditors, but what is to prevent a graduate from taking out a few loans or using credit cards—people's credit limits are raised with amazing speed—to pay off their student loan and then declare themselves bankrupt? That would be perfectly straightforward. In that situation, the Government would benefit at the expense of other creditors.

Chris Grayling: The hon. Gentleman is right that there is nothing to prevent an individual from doing that, but the downside is that their credit ratings would be destroyed for the foreseeable future and their professional career would be massively undermined. They would pay a pretty heavy price for a short-term measure to remove their student debt. It would be wrong to say that no one would be tempted to do that, but I doubt that many smart graduates would see that as a sensible way of building financial prosperity. That is not how I see the Government benefiting from other creditors.
 Let us imagine that someone goes bankrupt owing the Minister and the Government £10,000 each. Normally, if the Government came in as an active creditor, both creditors would get half—they would both get £5,000 of their £10,000. Under the Bill, however, the Government are guaranteed to get their money back later. It would be perfectly possible, therefore, for the insolvency courts to give the Minister all his £10,000 so that he was not out of pocket. The Government would get everything back when the person was out of bankruptcy. It is logical, and a natural extension of what the Government are saying, that they would not seek to be an active creditor in such situations and would not seek to jump in and get their half of the £10,000—their £5,000. They would ensure that the other creditors did not lose out because they had the guarantee that they would be able to recover their money at a later date when that person was discharged from bankruptcy. 
 I should be grateful for the Minister's clarification of that because, while I understand the rationale behind the measure, the Government should not be able to have their cake and eat it and establish themselves in the position where they get their money back regardless, at the expense of—

Alan Johnson: The taxpayers.

Chris Grayling: Well, I do not believe that the Government should introduce measures that allow them to get their money back in all circumstances and then take money back from the creditors' pot as well. They need to clarify and explain that.

Ivan Lewis: It is a delight to get back on my feet after a month of sitting in the Committee. There has certainly been a process of ageing. At the beginning of our proceedings, my hon.
 Friend the Member for Stalybridge and Hyde (James Purnell) was 33; he is now 34. I was 36 and I am now 37. It has obviously been a difficult and stressful time.
 I am delighted to have the opportunity to respond. It is important to recognise that young people making choices and examining bankruptcy as an option is not a minor matter or a joke, but a serious issue. It is indicative that the National Union of Students has made it clear to students and graduates that it does not regard opting for the bankruptcy route as a sensible decision because of its consequences, as outlined by the hon. Member for Harrogate and Knaresborough. 
 However, it is also important not to exaggerate the number of students choosing that option. Less than 1 per cent. of student loan borrowers go down the bankruptcy route. The irony is that the income-contingent nature of the system of student support that the Government propose minimises the dangers to graduates of financial indebtedness over a period of time.

Chris Grayling: On the figure of less than 1 per cent., the Minister will be aware that at current levels 1 per cent. of the student loan book is approximately £120 million. That is not an insignificant sum. Will he clarify the figure of less than 1 per cent? Are we talking about massively less than 1 per cent. or something close to £120 million?

Ivan Lewis: Of the people who take out student loans, less than 1 per cent. of that cohort find themselves in a bankruptcy situation. There was an increase within the past year, which I think most people accept was largely connected with the publicity on the option of using bankruptcy as a way of not paying student loans. A particular issue arose and it received a tremendous amount of publicity. There was such a dramatic increase in those 12 months that it is reasonable to link it to the attention that was focused on the issue and the ensuing greater awareness of that option. The figures are 2,400 bankrupts and 2 million borrowers. I hope that that gives the hon. Member for Epsom and Ewell (Chris Grayling) a clearer idea of the numbers involved.
 The decisions that we make on bankruptcy are a matter of principle. There are a range of reasons why it is appropriate to remove student loans from the bankruptcy process. It would be wrong to allow a small minority of graduates to evade responsibilities that are accepted by the majority. I expect that all members of the Committee will accept that the vast majority of graduates would regard it as their responsibility to pay the loan back. We should do nothing to support the small minority who might choose not to fulfil those responsibilities. 
 Bearing in mind the damage that can be caused to an individual's life chances by bankruptcy, it is right to remove any perceived incentive that would encourage students or graduates to make that choice. When we speak of the Government's role—Conservatives Members are usually good at making this point—we 
 mean protecting the interests of the taxpayer. Whatever legislative framework we use, we should ensure that we behave responsibly in protecting the public interest—and in this case, public money. 
 We should remember that, despite the hon. Gentleman's observations, the student loan has an incredibly favourable rate of interest. No one can dispute that. It is nowhere near a commercial rate. Graduates will not find themselves facing bankruptcy because of their student liabilities, because the repayments are income contingent. Indeed, under the new proposals, graduates will begin to pay back only when they are earning £15,000 a year, and outstanding liabilities will be written off after 25 years. A series of principled and practical reasons make it appropriate to remove student loans from the bankruptcy regime. 
 As for the amendment, the fact is that we have no desire for the Government to become a preferential creditor. The clause takes student liabilities out of the bankruptcy framework. If we designated the Government a preferential creditor, the hon. Member for Harrogate and Knaresborough would have a valid point; but removal from the framework means that more non-governmental creditors are likely to benefit than if we did what he suggests. I suspect, in any case, that his amendment was probing. 
 The hon. Gentleman spoke about the Enterprise Act. One of the central aims of that Act is to free more money for ordinary creditors in bankruptcy cases. As I said, taking student loan debt out of the equation reinforces that view.

Phil Willis: Will the Minister confirm a point raised by the hon. Member for Epsom and Ewell, which is that in the event of graduates going bankrupt who had some assets available for redistribution to creditors, the Student Loans Company would never be a creditor, and that they would not be discharged from bankruptcy even if money owing to it had been repaid?

Ivan Lewis: No. The purpose of the clause is to remove the student loan from the bankruptcy framework. The student loan will be related entirely to a graduate's income under the income contingent scheme. The status quo is that the student loan is part of the bankruptcy framework. In many ways, that was an unintended consequence of legislation enacted by successive Governments. However, because of issues raised in the past 12 to 18 months, the Government became aware of the implications. We want to change that legislation through the Bill, thereby entirely removing that set of circumstances from the bankruptcy framework. That would also reinforce the point that the Government cannot be a preferred creditor in such circumstances, because that is not part of the bankruptcy framework and we have no intention of making it so.
 The hon. Gentleman also raised the historical question of selling off debt. That happened with the old mortgage-style student loan debt, which was sold in 1998 and 1999, but there are no plans to sell any more student loan debt to the private sector. In any 
 case, the terms and conditions of the loan are preserved by the sale agreement. Despite what he said about that, there are genuinely no risks or concerns.

George Mudie: The Minister seems to be using a sledgehammer to crack a nut. First, perhaps he will tell us about any other instance where something cannot be dealt with by bankruptcy proceedings. What other debt, and which other Department or private sector creditor, can be faced with that? Is this a unique, pioneering example in the bankruptcy world? Secondly, will he tell us whether there have been discussions with the Department of Trade and Industry? I understand that it is probably responsible for bankruptcy law.

Ivan Lewis: I can respond directly to my hon. Friend and give some specific examples. On secured creditors against their security, for example, a debt to a building society can be extinguished in relation to a mortgage, but the building society's right to equity on the property is not affected. Other examples are debt incurred through fraud, fines imposed for offences or confiscation orders, or liabilities to the court, such as bail bonds, and liability to pay damages for negligence, nuisance, breach of duty or personal injury. Those are all items that are not included—and would not be possible to include—as part of the bankruptcy framework.
 On consultation with the DTI, my hon. Friend knows only too well that joined-up Government is a reality. If he believes that—[Interruption.] It was ever thus under the previous Government. I assure him that consultation with all relevant Departments took place before we made the judgment that this is an appropriate measure. 
 I should like to respond to the comments made by the hon. Member for Epsom and Ewell—at least, those that I understood. The student loan balance would remain during bankruptcy. Interest rates accrue at RPI to maintain the same value in real terms. In the previous year that was 1.3 per cent., and next year it should be less than 3.1 per cent. As my right hon. Friend the Minister of State said, without RPI interest the loan would lose value in real terms. When the graduate repays the loan, they repay only the value in real terms. That is a reasonable, logical and appropriate way to protect public resources and funds.

David Rendel: There is one further thing about which I am a bit confused. Perhaps an individual has debts in the private sector and another debt to the student loan body. If the private sector debt is comparatively smaller, and the assets would be sufficient to cover that, but not his total debts, does the Bill mean that he could not become bankrupt, because the debt to the student loan body would be discounted?

Ivan Lewis: As far as I know, that would not be the case, but I am happy to the write to the hon. Gentleman on that issue if that would be helpful.

Chris Grayling: To clarify what I am pretty sure the Under-Secretary said, is it the case that Governments will no longer seek to recover capital from student loan debt from the pots of money that the official receiver recovers when somebody goes bankrupt? In other words, the Government will not seek to be one of the creditors who recover money during that process.

Ivan Lewis: That is entirely the purpose of the clause. The issue is important, not minor, but the whole debate is sometimes deliberately contrived to give the impression that the student finance regime that we propose will have a punitive impact on graduates. It is important to cite some hard facts. A graduate earning £20,000 a year will repay only £450 a year, which is £8.60 a week. That is the impact of the income-contingent student finance regime that we propose. The idea that the changes that we are making will increase the risk of bankruptcy for graduates is absolutely untrue. With that, I would ask the hon. Member for Harrogate and Knaresborough to withdraw the amendment.

Phil Willis: I thank the Under-Secretary most sincerely for his response. People reading the Committee Hansard will find his comments very interesting indeed. The Government have said today that the Bill will totally change the situation with regard to an individual's debt and credit worthiness. We now have a new term, ''permanent deferred creditor'', to describe what a graduate's loans will result in.
 The Government have also said that although the finance company and those assessing a graduate's overall credit worthiness will have to take a debt to the Student Loans Company into consideration, in fact, bankruptcy will not be part of that. The Under-Secretary is right. One of the reasons for the amendment was to secure from the Government an understanding that under the clause a student's debts will be totally separate in case of bankruptcy. The debt will sail on, irrespective of whether a person goes bankrupt. That will create a unique situation in British law.

Ivan Lewis: Does the hon. Gentleman believe that it would be responsible of any Government to tell the vast majority of graduates who fulfil their responsibilities, as is appropriate, that it is absolutely fine for the debt of the small minority who do not to be written off when bankruptcy occurs?

Phil Willis: The Under-Secretary cannot have his cake and eat it. I totally agree with him. In fact, I said in my opening remarks that I did not believe that students simply filed for bankruptcy for a laugh or because it was a cool way to get out of debt. By the way, the figures that the Under-Secretary cited were totally different from those that the Minister of State gave me in a parliamentary answer in February.

Ivan Lewis: They have changed.

Phil Willis: Well, they have changed quickly from 899 to more than 2,000. That is an astonishing change in less than a month in the number of people filing for
 bankruptcy. Also, I hope that my remarks at no time suggested that I was deliberately encouraging students to file for bankruptcy.
 Why is it right that the plumber who puts in a new gas fire for a graduate in their home should do without any recompense at all when that graduate goes bankrupt, but it is okay for the debt to the Student Loan Company to continue ad infinitum? It might be right for the taxpayer, I accept that, but why is it not right for the individual business man to be in a similar situation?

Alan Johnson: Can I test the hon. Gentleman on the matter? There is nothing between either party about loans. As far as I know, the policy of the Liberal Democrats and the Conservatives is not to do away with income-contingent loans and go back to a universal grant.
 Does the hon. Gentleman accept that the unique factor is the income-contingent repayment? When it was introduced in 1998, everybody involved with the original legislation understood that this was exactly the kind of situation that would arise because of the income-contingent nature of the repayment. If one is not earning above the threshold, one does not make a payment; if one is, one makes a payment. It should therefore be kept completely out of the bankruptcy situation. I know that he had some involvement with the original legislation. Does he not accept that that was the original intention and that everyone involved when income contingency was introduced felt that that was the situation, until the debate in the Lords on the Enterprise Act revealed that unbeknown to anybody there was a flaw?

Phil Willis: I fully accept what the Minister says. As we sat through those debates on the original legislation, I do not think that any of us contemplated a situation whereby students deliberately filed for bankruptcy to get out of paying back their debts. The point that I made to both the Minister and the Under-Secretary is that the number of students who actually do that is very small indeed, by the Minister's own admission. I accept the point that the Minister rightly made that, given the mass publicity that followed the Lords debate in 2002, people were encouraged—frivolously, and quite wrongly in my view—to file for bankruptcy.
 I will obviously reflect on what the Minister says and on the debate—that is why this is a probing amendment. However, I do not believe that the situation is so big that we should say to any individual who is likely to be a self-employed business person in the future that if they file for bankruptcy, and find themselves in such a serious situation, they should come back after bankruptcy to find that they still have their student loan, even though it is repayable—I fully 
 accept that—on an income-contingent basis. That was the basis of the probing amendment, and I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Clause 39 ordered to stand part of the Bill.

Clause 40 - Other amendments of section 22 of Teaching and Higher Education Act 1998

Anne Campbell: I beg to move amendment No. 213, in
clause 40, page 18, line 36, at end insert—
 '(2A) After subsection (2) insert—
 ''(2A) In determining the levels of residual income below which a parental contribution shall not be required in respect of any grant for an eligible student, regulations under this section must establish different levels for each region reflecting such indices of the cost of living in different regions as the Secretary of State considers appropriate.''.'.

Roger Gale: With this it will be convenient to discuss amendment No. 214, in
schedule 6, page 33, line 23, at end insert— 
 '9A In section 43(1) (general interpretation), insert— 
 ''region'' means— 
 (a) Wales, and 
 (b) the regions of England specified in Schedule 1 to the Regional Development Agencies Act 1998.''.'.

Anne Campbell: One of the interesting things about the process of a White Paper and then a Bill is the change that takes place in the course of that evolution. I appreciate the way in which my right hon. Friend the Minister has listened to the fears expressed by Back Benchers and has managed to modify the Bill quite considerably to accommodate those concerns.
 When we began this process, the White Paper originally said that there would be grants of £1,000 for those whose family income was under £10,000 a year. That was then changed to families with incomes under £15,000 a year. It later became a grant of £1,500, available to those from families with incomes under £15,000 a year. We have now seen a further change with the roll-up of the fee remission of another £1,200, making a total grant of £2,700, and a bursary of £300, which adds up to a final figure of £3,000. That is a good deal for people from lower-income families. I no longer have the concerns that I had about students from very low-income families being deterred from going to university. What is now on offer is much better than the current situation. I believe that more students from poorer backgrounds will be encouraged to go to university under the Government's proposals. 
 However, I have a concern and I hope to be able to push the Minister a little further this afternoon on it. There are students who come from families who do not appear to have a very low income but who live in an area that has high-cost housing. That is the case in my constituency and in those of my hon. Friends who have subscribed to the amendment. The problem was first brought to my attention by my hon. Friend the Member for Reading, West (Mr. Salter), who has great 
 concerns about families in his constituency who do not appear to be on very low incomes but who have small disposable incomes. 
 I have examined comparable house prices in different regions and areas. There are huge discrepancies. You will be sorry to hear, Mr. Gale, that I do not have the figures for every Committee member, but I have focused on a couple of places to illustrate the point that I am trying to make about the huge differences. The figures were taken from the Land Registry, and they are recent, having been last updated on 4 February this year. In the constituency of my hon. Friend the Member for Reading, West, the average price of a two or three-bedroom terraced property is £156,000; in Greater Manchester, it is just over £68,000; in Salford, it is £58,000. In parts of London, the figure is much higher. Greater London's average price for such a property is £271,000, but that varies: in Barking and Dagenham, the figure is £158,000 and in Kensington and Chelsea it is about £1.5 million. Cambridge is very expensive compared with many of those places, although not with Kensington and Chelsea's £1.5 million: the average cost of a terraced house in Cambridge is about £234,000. I am seeking to illustrate that the disposable income of somebody who lives in a very high-cost housing area such as my constituency will be far less than that of people who live in cheaper housing areas. 
 I have also examined the mortgage repayment for an average Cambridge terraced house costing £234,000. Assuming that the purchaser had a deposit of about £25,000, they would be paying their mortgage on £209,000. The Council of Mortgage Lenders average interest rate for the past month was 4.19 per cent. Using that figure and the Moneyfacts mortgage calculator, the monthly repayment on a repayment mortgage for that property over 25 years works out at £1,125. That is consistent with Nationwide's figure of £1,238 as the monthly repayment. 
 Let us consider someone in Cambridge who comes from a family at the top end of the income scale at which a grant would be payable, with an income of around £33,000. The take-home pay on a salary of £33,000 would be just over £2,000 a month, out of which one might pay £1,125 in mortgage costs, thus leaving a disposable income of about £1,000 a month. That is not a great deal for a family that may consist of two adults and two teenage children. Now let us consider the same calculations for a family in Manchester. First, I remind the Committee that one can buy a terraced house in greater Manchester for £68,000. If we make the same assumptions as before and allow for a deposit of £25,000, mortgage repayments of £43,000, and take-home pay of £33,000, the mortgage calculation would be £225 a month, thus leaving £1,941 of disposable income. 
 There is a huge difference between the disposable income of those two hypothetical families, who have the same income but live in different areas. In Cambridge, they would have a disposable income of about £1,000 a month, whereas in Manchester it would be almost £2,000 a month.

Phil Willis: The amendment is an interesting one, and raises a crucial issue about differential house pricing and costs. However, does the hon. Lady accept that, in Cambridge, there will be people who earn £33,000 and live in housing association properties with relatively low rents, whereas there will be others on the same income who live in expensive homes? Does she presume that each of those students would get the same grant?

Anne Campbell: Someone who has lived in a housing association property for some time may earn £33,000, but there is no way that someone coming into the city on that kind of salary would qualify for a housing association property. The Hundred Houses Society, a housing association in Cambridge, told me that it would not be able to offer a property to anyone earning over about £18,000 a year. That makes it almost impossible for anyone earning between £18,000 and £30,000 a year to live in the city, because they would not be able to afford the rent or mortgage repayments, and they would not qualify for local authority housing or for housing association properties. There is a real dilemma there. I do not say that that situation exists in all expensive housing areas, but it is certainly true in my constituency.
 For a mortgage payer in Cambridge to be as well off as someone earning £33,000 in Manchester, they would need to earn £8,400 more a year. In other words, in Cambridge, one would have to earn £41,400 a year to be as well off as someone in Manchester earning £33,000 and paying a different mortgage.

James Plaskitt: I follow the drift of my hon. Friend's argument, but as she seeks to redress the situation by establishing different levels for each region, will she define how she intends the word ''region'' to be used?

Anne Campbell: I hope that there may be a fairly liberal interpretation of ''region'', because I know that there are some low-cost areas in the eastern region. For example, houses in Suffolk and some parts of Norfolk are much cheaper than in my constituency. The sensible approach would be to say that areas that achieve area cost adjustment through their local authority funding mechanisms—
Mr. Plaskitt indicated dissent.

Anne Campbell: I am sorry that my hon. Friend is shaking his head. Perhaps he is unaware of the difficulty that low-income families have surviving in expensive parts of my constituency. It would be helpful to make use of a mechanism such as the area cost adjustment, which is already in place.

Alan Johnson: I thought that amendment No. 214 defined regions as those
''specified in schedule 1 to the Regional Development Agencies Act''.
That would give no flexibility and would define regions in accordance with the regional development agency's boundary. That is a genuine point. Perhaps I have misread the amendment, although I do not think that I have.

Anne Campbell: I confess that when I read the amendment again, I realised that it might exclude my constituency, so I was trying to encourage the Minister to think about it flexibly. Nevertheless, whether we take regions or county council areas, to which the area cost adjustment currently applies, the principle is the same, and the figures that I chose to illustrate my point demonstrate the problems of living in high-cost housing areas.

James Plaskitt: Let me explain why I am concerned about my hon. Friend's proposal. Let us imagine a typical terraced property in Leamington. A similar-sized property just 10 miles away in the city of Coventry would be about one third of the price, but both properties would be in the same region under any system of regionalisation.

Anne Campbell: There will obviously be big differences. People will choose to live in areas that they can afford and within travelling distance of where they want to work. It is difficult for teachers, social workers, postal workers, bus drivers and council workers, such as refuse collectors, to live anywhere near Cambridge, and they tend live outside it, where housing is cheaper. I cannot accept that families in high-cost housing areas feel anything like as well off as families in low-cost housing areas, because their disposable income is much lower. That would certainly apply to many students.
 I am grateful to my hon. Friend the Member for Nottingham, North (Mr. Allen) for finding out what percentage of students in the constituencies of members of the Committee would qualify for the full grant if they managed to achieve the two A-levels needed to enter university. In several constituencies, the percentage is very high. As he said, 65 per cent. of students in his constituency would qualify for the full grant, while 41 per cent. in mine would qualify, at the current rates. That illustrates that Cambridge is not full of very high-income families. There are low-income families, who find it difficult to survive, because of the high housing costs. 
 I am suggesting that the family income threshold for those who qualify for the full grant should be a higher in high-cost areas than in lower-cost areas. Currently, the full grant goes up to an income of £15,950 a year, and some grant is payable to those with an income right up to just over £33,000 a year. 
 I am glad that Cambridge university has recognised the problem and deals with it in the way in which it structures its bursaries. Cambridge is suggesting that bursaries be available to students with family incomes of up to £35,000 a year. We may need to recognise that some families need a higher income in order to achieve the same standard of living as others. I am sure that this will prove to be an interesting debate. 
 We must also recognise that students from families with little disposable income are the most reluctant to go to university. It is for that reason that the Minister and Labour Back Benchers have campaigned so hard to get a grant in place to support those we want to encourage to go to university. I very much hope that the Committee will give that proper consideration and come to the conclusion, as I have, that there should be different thresholds in high-cost housing areas.

Tim Collins: The hon. Lady deserves the Committee's congratulations on raising this issue. I suspect that she will not have carried all Committee members with her on how the problem should be tackled, but she is quite right to address a problem that is of concern in many parts of the country.
 I thought that the hon. Lady underestimated her contribution to proceedings when she made her comment about how interesting it had been to observe how the Government's proposals had evolved since the original White Paper. That is slightly to understate the pressure that she and a number of Labour Members put Ministers under. I am not quite sure that it was so much a process of smooth evolution as of complex negotiation. It is precisely because she has made a significant contribution to the evolution of policy in a number of respects that what she is saying is of particular importance. 
 It was clear from a few interventions that the hon. Lady took from Labour Members that some people will be a little sceptical about whether it is possible to address the issue on a regional basis. For example, in my region—the north-west—there is a huge distinction between the property prices that apply in the Lake District national park in my constituency, and those that apply in the middle of inner-city Merseyside or Manchester. As other people have mentioned, there would be major distinctions even within some local authority areas or constituencies. In my case, the distinction between properties in the national park area and outside is dramatic. It would therefore be quite difficult to deal with the problem on a regional basis. 
 Having said that, it is worth while addressing not only the exact text of the amendment but the spirit behind it, and I hope that the Minister will do that. That is important, because there are huge differences in the housing costs faced by people in different parts of the country, and that clearly makes a huge difference to their disposable income and therefore to their prospects of providing significant support to their offspring as and when they decide to go to university. That subject needs to be tackled. 
 I will be candid with the hon. Lady: I am not sure that there is an easy way of doing what she suggests. The Government have chosen to go down the route of providing support on the basis of income. That is objectively measurable: it is fairly easy to ascertain the difference between people who are on high, middle or low incomes. She is right to address the difficulties that arise from the possibility that a big chunk of that income is consumed by housing costs, but there would be difficulties in some circumstances, even within the 
 same ward, in measuring differences in housing costs, for the reasons that I and other hon. Members have cited. 
 I suspect that we all have areas in our constituencies in which there is a big, or at least measurable, difference between the value of houses on different sides of the same road. The issue would get very complicated. That is not to belittle the point that the hon. Lady makes, which is legitimate and important. However, if we are in the business of finding practical solutions, I take the view that trying to address the problem at regional level would create more anomalies than it would resolve. To be perfectly candid, I have some scepticism about whether trying to address it even at local authority level would resolve the problem rather than making it worse. 
 I look forward to what the Minister may be able to say about the matter. Perhaps he will be able to say that the Government will reflect on it. I do not think that there is an easy answer. I have expressed reservations about the hon. Lady's solution, but I do not pretend to have a magic-wand solution myself; I suspect that none of us has. However, if the Government were to deploy great and weighty minds to think about this issue, that would be widely welcomed.

David Chaytor: I entirely understand the concerns of my hon. Friend the Member for Cambridge (Mrs. Campbell). I commend her for her research and for the statistical analysis that she presented to the Committee. However, I am mindful of the comment made about an earlier amendment by the hon. Member for Ceredigion (Mr. Thomas). He described it as ''anti-devolution''. Given the prospect of successful referendum results on devolution to the north of England later this year, I describe this amendment as ''anti-devolution'' also, because it works against the interests of people in the northern regions.
 Although I accept the detailed analysis given by my hon. Friend, I am also mindful that such statistical projection based on house prices is exactly the sort of projection given by the Conservative Government in 1990 to justify the standard spending assessment regime, and particularly the area cost adjustment component of that regime, which for more than a decade systematically discriminated against regions in the north of England. I am therefore sceptical about whether such a solution is fair or workable. 
 If we base anything on house prices, we base it on shifting sand. As we know, house price differentials are not stable. What might be an enormous differential one year can turn out to be different the following year. If there is any house price trend at the moment, it is that the rate of increase in the south-east is slowing, while in the north it is increasing. We may see a convergence of house prices across the country. That is testimony to the fact that prices have been overheating in the south-east and have become unsustainable. Nevertheless, it would be misguided to legislate on the basis of a differential in 2004 that may have disappeared by 2007. 
 My second objection is the impossibility of generalising across regions. A few kilometres from the town in which I live, there are communities in which one can still buy a terraced house for £25,000. If one travels four or five miles in another direction, the typical price for a terraced house is similar to that cited by my hon. Friend the Member for Reading, West. It is utterly impossible to generalise across regions. As several hon. Members have already said, the variations within regions are enormous. 
 I do not deny that there is difficulty for low-income families in certain towns throughout the country, but almost by definition, families earning £20,000 or £30,000 a year cannot buy terraced houses that cost £150,000, because they could not secure a mortgage. It does not necessarily follow therefore that those families who live in rented accommodation, often in social housing of one sort or another, will be at such a disadvantage, because the rents are not directly proportionate to the capital value of house prices.

Anne Campbell: I am grateful to my hon. Friend for making that point. Does he agree that housing associations and local authorities will not accept for properties families with incomes above £18,000 a year? Moreover, people may have qualified for that low-cost property some time ago when they were earning that amount, and continued to live in it when they have increased their incomes. Does he also accept that there is a strong relationship between the rents in the private rented sector and mortgage costs? I have undertaken research and found that, to pay the rent for a two to three-bedroom house in the city centre of Cambridge, a person would have to find about £900 a month.

David Chaytor: I do not deny the validity of the first of my hon. Friend's points, but I say in response to her second point that it is highly unlikely that many people on low incomes would be living in the centre of Cambridge. Her example is not sufficient for a generalised argument.
 For those who are living in houses that are currently valued at £150,000 in Reading or £235,000 in Cambridge, it follows that they bought them some time ago. Therefore, they have the benefit of a significant windfall capital gain by virtue of having lived in the houses for a certain time. When discussing the matter with my hon. Friend the Member for Reading, West, I said that the difference between someone on a low income in Reading and someone on a low income in one of the towns in the north is that the family in Reading has the choice, if they choose to exercise it, of selling their house, moving to a different region and pocketing the capital asset. That choice is not available to someone in a small town in the north of England, whose capital assets are about £25,000. 
 My hon. Friend the Member for Cambridge has identified a problem, but her proposed solution is not appropriate. It would establish a remarkable precedent for the way in which the Government—or any Government—established a framework for all other forms of benefit payments. Does she similarly 
 argue that there should be regional variations for child benefit, the minimum wage or tax and pension credits? That is the logic of her argument.

David Rendel: I have much sympathy with the hon. Lady's amendment. Like me, my hon. Friend the Member for Harrogate and Knaresborough comes from an area in which housing costs are extremely high, and we are both aware of the particular problem that she has highlighted. However, as has been said, there are good reasons for supposing that this is not the right way of tackling it. We keep addressing the difficulty of high house prices by providing more resources for people who live in high-cost areas to meet those prices, as a result of which house prices continue to increase. In a sense, we make the problem worse each time we provide more resources to pay for house prices rather than trying to do something to bring them down or at least make them more even throughout the country.
 In the end, to a large extent, house prices are a matter of supply and demand. The fact is that many people want to live in high-cost areas and there are not so many who want to live in low-cost areas. While supply and demand are out of kilter with each other, and more money is pouring into areas where supply is low and demand high, that simply enables people to pay ever higher house prices in those areas. We have tried that with various cost of living allowances: we have given such allowances to a large number of public sector workers in London. We must do that: I have myself argued in favour of special living allowances for high-cost areas in my area and others. In the short term, that is the only answer. However, we must surely consider longer-term solutions that will provide more housing to meet demand, or change the areas where demand exists. Perhaps we should try to generate higher demand in areas where house prices are currently comparatively low, and put jobs back into areas of high unemployment where it is more difficult to obtain work so that there is lower demand for housing. If it can be tackled in that way, it will be a much more effective long-term solution to a genuine problem.

Anne Campbell: Forgive me if I am wrong, but I thought that when the Liberal Democrats had a policy on the national minimum wage, it was a regional, rather than a national policy. Perhaps the hon. Gentleman might have argued then for regional variation in the national minimum wage, whereas he now seems to be arguing against the equivalent proposal.

David Rendel: Part of the reason for a regional policy for the national minimum wage is to encourage employment into areas where housing prices are low. That is the long-term solution to the problem.

James Purnell: I, like other hon. Members, have some sympathy with the amendment. As someone who was briefly a chair of housing in an inner London borough, I know that
 there are genuine difficulties in finding housing for people who are not, by the standards of the south-east, particularly poor. However, now that I represent a seat in the north-west, I should also tell my hon. Friend the Member for Cambridge that there is a real anger at what is perceived to be a larger share of public spending going to the south-east to address its problems. She talked repeatedly about somebody in Greater Manchester and their housing costs. Perhaps we could turn that into the Greater Manchester question—not the West Lothian question.
 Many of my constituents would say that, for example, a large amount of money goes to transport in the south-east to tackle congestion there and a large amount of money deals with social housing there. On health and equality, people in my region live five to 10 years less long than people in my hon. Friend's region. As has already been mentioned, in local government, the spending formula already distributes money unevenly. To exacerbate that by treating the symptoms rather than the causes of inequality would create quite genuine anger and make it more difficult for someone like me to sell this Bill to my constituents. 
 I do not want to repeat the comments made by my hon. Friend the Member for Bury, North (Mr. Chaytor), because I agree with all of them. I want to amplify a couple of points that my hon. Friend the Member for Cambridge made in response to a couple of interventions. She said that she wanted the adjustment to be more precise and more flexible than on a regional level. I can understand that, because the point made about regional variations is absolutely right. However, the danger is that if the definitions were made on the basis of local authorities, the other problem of boundaries between local authorities would become much worse. If regional policy was introduced, there would be a problem of one person in one street receiving a certain level of grant and another in another street receiving another. If local authority definitions were used, that problem would occur all over the country. It would happen between Barking and whatever the rich place next to Barking is. There would be widespread difficulties concerning house price variations. There are practical difficulties. Even at regional level, it would be such a blunt instrument that some people who are well off because house prices in their area are low would receive a benefit that they did not need, or there would be the opposite problem, and massive boundary problems across different local authorities. 
 There is also the practical problem of people working in one area and living in another, and how that would be dealt with. Like my hon. Friend the Member for Bury, North, I have a very well-off area a few miles down the road from where I live. Some parts of Stockport are much better off than parts of Surrey, and with similarly high house prices. In some areas of Stockport, house prices have doubled in the past two or three years. It would be very dangerous to build policy on the shifting sands of house prices. 
 The solution to the problem is to deal with the causes of regional inequality, not the symptoms. We need to ensure that there is greater economic 
 development in the regions of the north, and proper investment in their infrastructure. The Government are doing that, and we hope that the problem that my hon. Friend the Member for Cambridge wants to tackle will lessen over time as that investment is made. 
 As hon. Members have said, the fact that house prices are starting to converge is evidence that people are deciding that they would be better off living in an area of lower-cost housing rather than struggling and living in very cramped accommodation in the south-east. People make choices. If they live in the south-east on an income of £25,000, they will not be living in a house that is worth £250,000 or £300,000, but will be living in cheaper accommodation, sharing accommodation, or commuting. In return, they have the advantage of a thriving economy, very low unemployment, and the investment that I mentioned earlier. 
 My final fear about the amendment is that it would be self-defeating. I am no economist, but awarding grants to people with a higher level of income in one part of the country would make buying houses in that area more attractive. The same is true of school places: house prices rise in areas with access to local schools that people find attractive. In the end, the adjustment would simply be played out in higher house prices in the areas that received that benefit. It would serve only to accentuate the economic inequalities that we should seek to redress. I therefore cannot support the amendment, because it would be very hard justify to my constituents. It would worsen the problem that it is designed to solve.

Alan Johnson: I, too, recognise the genuine problem to which my hon. Friend the Member for Cambridge refers. I believe that she will be one of the delegates whom I am meeting tomorrow to talk about it. I share the view expressed by the hon. Member for Westmorland and Lonsdale (Mr. Collins) in that I cannot think of a solution to the problem of how we deal with grants. I am, however, sure that the amendment does not provide a solution. I will take time to explain that statement, which in no way detracts from the problem that my hon. Friend the Member for Cambridge and other colleagues have described.
 My hon. Friends for Bury, North and for Stalybridge and Hyde made very eloquent speeches, but I will start with the wording of the amendment. My point is technical, but it goes further than that. The amendment refers to residual income and parental contribution, but parental contribution does not come into it. It did with fee remission, and it does with loans. We means-test 25 per cent. of the loan because we expect a parental contribution, but parental contribution does not come into it in the case of the grant now that fee remission is rolled up with grants. However, that is a minor point. 
 It is not the case that residual income is the same as disposable income, and that house prices will therefore be a factor. This year, we are moving to residual income for the first time. Residual income is not defined like that. It does not deal with disposable income, but makes a £1,000 allowance for each 
 dependent child, and considers pension premium payments and maintenance payments. It also excludes any income earned during their studies by adult students whose income is assessed for grant. Using the term ''residual income'' will not do what my hon. Friend the Member for Cambridge wants it to do.

Graham Allen: It is notoriously difficult to come up with answers as Committees are proceeding, but my right hon. Friend the Minister has generously accepted that there is a problem. He has also established that there is no obvious answer at the moment. There are, however, a number of commissions and inquiries that relate to the issue. He does not have to give an answer now, but will he give some thought to whether consideration of the problem that he and other colleagues have identified comes within the remit of the various commissions and whether they could come up with something that satisfies us, perhaps not in the next year, but over the next couple of years?
 There is a genuine problem, and the answer is not for someone to get on their bike and sell their house. There must be something equally ingenious such as the system that we now have for repayment of fees on an income-contingent basis, which no one had thought of before. An answer can be divined, and perhaps the Minister will put that question before one of the commissions.

Alan Johnson: As always, my hon. Friend makes a good point. However, he talks about one of the commissions when in fact there is only one—the independent commission that will come into play three years after the introduction of variable fees. We could ask the commission to consider the issue but, even with its brain power, it would find it difficult to solve the problem in a simple way, and if we cannot solve it in a simple way and we are going to introduce the complexity and uncertainty that the amendment would introduce, it is not worth going down that route in the first place.
 There is a serious problem relating to residual income, but there is also a problem with how the proposal would work. Let us think it through. There are a lot of us northerners on both sides of the Committee—adopted northerner though I may be, along with others on the Government Benches. We could go for one of two systems. We could keep the existing baseline and say that those who are below the £15,000 level get the full maintenance grant and then it is tapered up to £33,000 a year. We could implant on top of that a shadow scale to reflect the cost of living in the area, but in that case there would be a serious problem. 
 I can imagine someone living in Slough selling a valuable house in the Thames valley and moving to Hull, where it is probably possible to buy a whole street for a relatively low price. The person might have an income of £25,000 or £30,000, which meant qualification for the full grant, but next door might be someone on £25,000, and only £900 of the grant would be received. Then the grant would have to be 
 reassessed because the person was living in a different area, with all the complications that that entailed. That would involve an enormous amount of extra money, because there would be the grant, which is expensive as it is, and we would be adding an extra tier on top. From reading the amendment, however, I think that what my hon. Friend the Member for Cambridge suggests is worse than that, because it would establish different levels for each region, so there would be, for example, a Yorkshire and Humber scale, a north-west scale and a Merseyside scale. There would be a regional scale as defined by the regional development agency boundaries.

Anne Campbell: Last November, my right hon. Friend the Chancellor of the Exchequer announced in the pre-Budget report the introduction of geographically differential pay across the public sector. He also talked about a stronger local and regional dimension for the pay review bodies. That encompasses the principle that I am asking the Minister to take on board this afternoon. He is arguing strongly against that principle, but all I am saying is that it has already been accepted in another Department.

Alan Johnson: That reflects back to a point made by my hon. Friend the Member for Stalybridge and Hyde: the answer is to look at increasing the prosperity of the country as a whole. That is very much part of the regional agenda. The initiative announced by my right hon. Friend the Chancellor of the Exchequer in last year's Budget was to get retail price indices on a regional basis.
 I was a trade union negotiator and remember that we had a dispute about a similar issue in the late 1980s, because places such as Cambridge and other areas did not qualify for London weighting. We introduced something called the difficult recruitment area supplement. The Chancellor made the point that such issues need to be examined much more closely, and he will produce those indices every four or five years rather than annually. However, for us to meet the terms of the amendment, we would need annual indices, because we reassess the entitlement to the grant every year of a three-year degree course or every two years if it is a foundation degree, so I do not think that that helps the argument put forward by my hon. Friend the Member for Cambridge. 
 The alternative to the system that I quoted, which has its problems and is very expensive, would be to set up those different levels. That would open up the prospect of someone in my constituency or other constituencies not qualifying for the full grant on an income of under £15,000 a year, because the whole basis of that argument is that there would be a different scale, and qualification for the full grant might occur at a lower level. That would create much more antagonism than already exists. I am not saying that the people of Hull, West and Hessle were chairing me round the streets because of the Higher Education Bill, because, although many of my constituents support it, 
 it is not top of their agenda. However, there would be outrage in my constituency and in others if we went down the route suggested. 
 On the amendment, the question of where the boundary is set is a real issue. A situation could arise in which a student or a family moves just down the road, crosses a boundary and thereby loses or gains their grant or finds that their grant decreases between one year and the next. That would be a real problem. There is no reliable measure of regional variations at present; the Chancellor might produce one eventually, but even if he were to do so, I do not know whether it would be produced annually. 
 The point has already been made about variations within regions that are as big as those between regions. We did not just pluck that concept from the air; it was demonstrated by a very detailed analysis carried out by the Joseph Rowntree Foundation. The hon. Member for Westmorland and Lonsdale was right that the process would come down to ward level, with all the complications that that would involve. 
 As my hon. Friend the Member for Bury, North said, there is no means test applied by Government anywhere else, as far as we are aware. There is no means test or variation of that kind for tax credit, nor is there a variation for benefits. In the summer, we are rolling out the education maintenance allowance nationwide. My hon. Friend the Under-Secretary is responsible for that. It is horrendous to think of having to introduce such a measure for the education maintenance allowance, which we would have to do if we introduced it for grants for higher education. That would cause huge difficulties. 
 My hon. Friend the Member for Stalybridge and Hyde spoke about the disparities between the regions. However, another problem with the amendment is that it would create losers among exactly the sorts of people whom we are trying to encourage into higher education. If one examines the percentages of those entering higher education in conjunction with the cost of living index, there is an interesting dichotomy. For instance, London, which we would seek to help with this, has the highest density of people entering higher education—almost 24 per cent. The money that we would be taking away would come from Yorkshire, where there is the lowest density of those in higher education—19.7 per cent. That neatly flips the chart right round; it is an opposite equation. Those that would benefit from the amendment tabled by my hon. Friend the Member for Cambridge would be those from areas where the percentage of people entering higher education was highest, and vice versa. That is an important point. 
 I want to pick up on a couple of points that have been raised in an excellent debate. First, I want to chastise the hon. Member for Westmorland and Lonsdale who made the point that the Government's policy did not evolve smoothly, but through messy negotiation. It is right that my hon. Friend the Member for Cambridge, who by and large was not thrilled with variable fees, played a role in making representations about the issues of student support. However, so did my hon. Friends the Members for 
 Bury, North and for Nottingham, North and many other hon. Members who supported us and who would have voted with us all along on the basis of the principle of the Bill. They were continually raising points about the need to get the fee remission rolled in with the grant and to increase the grant. Therefore, we ought to set the record straight. Yes, there were people who were hostile to the whole concept, and they spoke to Government and persuaded us. However, others who were absolutely in line with the concept did the same thing. We listened to all sides of the argument, but this was a particular issue on student support that united everyone on these Benches.

James Purnell: Will my right hon. Friend tell me whether the Conservative party's policy had a strong influence on his evolution of the policy?

Alan Johnson: In terms of how it evolved, it told me the roads not to go down. Conservative hon. Members, in particular the hon. Member for Daventry (Mr. Boswell), were telling me at one stage that I had a difficult hand to play. I think that the Conservative's policy is the most difficult hand to play.
 The other point that I wanted to make was that the hon. Member for Newbury (Mr. Rendel) made a telling contribution. However, my hon. Friend the Member for Cambridge intervened and pointed out that the Liberal Democrats did not begin with a policy of a national minimum wage, and that is an issue. We have a national minimum wage, and the logic of going down this route is that we should not. The Liberal Democrats had a policy of a regional minimum wage, and they stood at the 1997 and 2001 elections on that policy. It was abandoned. 
 I had ministerial responsibility for the minimum wage and I remember the hon. Member for Twickenham (Dr. Cable) telling me that the Liberal Democrats had seen it work to such a degree that they admitted frankly and openly that they were wrong. I have every hope that the same procedure will be gone through by the Liberal Democrats on tuition fees and student contributions when the Bill goes through and that, after a couple of years, they will see, like a blinding flash, that that was the route to go down.

Phil Willis: The right hon. Gentleman is always so generous with his barbs. We changed our position on that, in exactly the same way as the Government have changed their position since 1998—the Teaching and Higher Education Act 1998 introduced up-front fees and so on—and, of course, since the manifesto of 2001.
 The hon. Member for Cambridge needs some support on the legitimate issue that she has raised about regional variations. All political parties, with the exception of the Conservatives, are examining the matter, and whether we like it or not, the Chancellor is right to examine those regional indices. If one examines what has happened in Scotland and Wales as a result of the Barnett formula, they can do other things because they receive, in terms of their percentage of regional GDP, an additional sum of money. I do not think that it is fair to chastise the hon. Lady totally, because there is room for manoeuvre in using the region as a method of finding a different 
 solution to some of the problems. That has been proven in Scotland and in Wales, by the Welsh Assembly.

Alan Johnson: I am not chastising my hon. Friend the Member for Cambridge—quite the opposite. It is my duty to point out the flaws in approach. I support decentralisation and regionalisation. I believe that the answer lies in that, in improving the economy throughout this country and in ensuring that the success in some regions is reflected throughout our country. However, we in government will continue to reflect on these real problems, and we understand the concerns. However, the amendments would create more problems than they would solve.

James Purnell: I should like to comment on the point about reflecting on regional variations, and the suggestion from my hon. Friend the. Member for Nottingham, North that perhaps the issue currently being discussed could be incorporated into a commission's thinking for further reflection. If the Minister goes down that route, will he assure those of us from northern constituencies that issues such as how to retain graduates in our constituencies in the north once they have been to university will be considered so that there is a balanced view of regional equality?

Alan Johnson: My hon. Friend raises an important point—and I think that another important point will come from another hon. Friend.

David Chaytor: No one is denying the significance of regional differentials, but any solution that depends on putting more taxpayer's money into making it easier for people to handle the effect of excessive house prices in certain regions will result in the opposite effect to that which is intended. That is pouring petrol on the fires of house price inflation. We must get to the root cause of the problem and shift the levels of collective investment in the regions, not compensate individuals for high costs in certain regions.

Alan Johnson: I accept my hon. Friend's point. The independent commission will report to Parliament on the success, or otherwise, of this policy three years after it is introduced. I am not trying to turn that into a forum to discuss the regional problem. I think that if there are specific concerns about this package, it makes sense for the independent commission to consider those problems, if they exist. However, the main aim of that commission will be to look at the effect of variable fees on the success of attracting widening participation and people not dropping out of university courses. That is the crucial element. The other issues are, to some extent, peripheral.

Anne Campbell: Can I take it from what the Minister said that he would be prepared to refer this point to the independent commission, so that it can be asked to consider how regional variations have affected the intake of universities?

Alan Johnson: That sounds like a good idea, but I want to reflect before giving a positive response and I should like to consult my right hon. Friend the Secretary of State. I should be able to do that before the meeting with the delegation tomorrow. I hope to give a final answer then. I hope that my hon. Friend will withdraw the amendment.

Anne Campbell: I want to answer a few of the points that have been made in the debate, which has turned out to be more interesting that I anticipated. Far from being born and brought up in the south and living there all my life, I was born in Dewsbury and brought up in Huddersfield. My daughter and two of my grandchildren live in Stoke-on-Trent, which is one of the cheapest housing areas. My family does not stand to gain personally from such an amendment.
 I agree with those people who have said that regional discrepancies are not economically healthy. We need to ensure that there is a more even spread of jobs and prosperity. I hope that will, in time, lead to more equal distributions in house prices, but I am concerned that that may take some time with the sort of discrepancies that currently exist. I shall not stray far in this direction, Mr. Gale, and I know that you will not allow me to do so. However, it is important to say that one of the reasons for spending money in areas like mine is that we need more affordable housing. Not everyone can take the advice of my hon. Friend the Member for Bury, North and move out if they find it too expensive. Some have jobs and families. It is not always possible to move, and moving could make things difficult. It is bad enough now trying to recruit teachers, bus drivers, postal workers, refuse collectors and others on low pay in areas such as mine.

David Chaytor: I was not advising people to get on their bikes. I was pointing out that wealth comes in two forms—income and capital. Would my hon. Friend not agree that the worst thing that could be done to increase house price inflation would be to use more public funds to make houses more affordable in high-cost areas? That is the central issue. Raising the public
 subsidy to enable people to buy excessively priced houses is the best guarantee of house price inflation, and regional differentials will thereby increase.

Anne Campbell: That, of course, is not what is being suggested. Other Government policies have encouraged house price inflation. For instance, I was in favour of the starter home initiative, but it affects house prices. However, the amendment would not do so, because it would not contribute directly to housing costs. It would support students from those families who live in the high-cost housing areas, but who have low to modest incomes. It would not have the effect suggested by my hon. Friend.
 My right hon. Friend the Minister said that the amendment would benefit those who live in areas that already have a high university uptake. Unfortunately, uptake varies. My constituency has pockets of severe social deprivation. I illustrated that earlier by mentioning two schools in my constituency that I visited during the autumn term. At one school, I asked 40 or 50 young people aged between 13 and 15 how many intended to go to university, and about 15 per cent. put up their hands. I asked the same question in the other school, only two or three miles away, and 85 per cent. of the children put up their hands. That illustrates the difficulty of trying to categorise and target young people. 
 We want to raise aspirations and to ensure that more people go to university. That brings me back to the point made by the hon. Member for Westmorland and Lonsdale: it is difficult to decide whether we should be talking about regions, areas, counties or wards. I can see difficulties with all of those. I hope that my right hon. Friend the Minister will take up the suggestion made by my hon. Friend the Member for Nottingham, North about an independent commission. That might be the best way forward. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.[Continued in column 599]

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